The 2020 that most biotech investors were looking for has been dramatically influenced by the Coronavirus and the race to find a cure. Our news feed is full of information about companies participating in trials, and further advancements seeking a cure for the virus. The race to find a cure could provide an investor with hefty returns. If I had $1000 right now, I would choose Co-diagnostics ($CODX) for a solid biotech investment.
By John Coughlin, Biotech Strategist
Before the time of the Coronavirus, Co-diagnostics specialized in the field of infectious diseases. Over the past year, Co-diagnostics have shifted their attention from creating tests for hepatitis B, hepatitis C, malaria, and other diseases to a full-blow effort into creating accurate test kits for the Coronavirus. Although they have shifted their efforts, Co-diagnostics is well-equipped to develop testing kits on a larger scale.
Co-diagnostics can be considered one of the biggest winners from the Coronavirus in terms of price-performance. Stepping back from the company’s stock price and more into the company’s performance, Co-diagnostics is an attractive buy. Essentially from the start of the year, Co-diagnostics has been a leader in the production and distribution of test kits across the United States and abroad. On May 1st, the company, backing its testing products, reported a “performance data demonstrating 100% sensitivity and 100% specificity.” This 100% accuracy of its test products showed the superiority of Co-diagnostics testing kits and has further brought in more government testing kit orders.
For biotech investors who do not want to chase story stocks, Co-diagnostics provides a haven for a conservative investor. Moderna and Novavax, who are actively in the process of finding a vaccination, create a space for highly speculative investors to inflate the price of a stock. Co-diagnostics, or CODX, is only focused on producing testing kits for the public, which will remain an essential activity. Looking at the stream of revenue the company has already received, the jump in stock price can be well justified.
Looking at a technical view of Co-diagnostics, the stock has, from a price of 91¢, risen to a year high of $29.72, and now sits at the $15 range. This price increase represents a roughly +1600% move related exclusively to their testing kits. Although Co-diagnostics has risen to great heights, there still remains an opportunity for a biotech investor to buy this stock.
At the current price of $15, the stock sits nearly 50% off its peak price of $29.72. Looking at prior price movement, the stock peaked initially at a price of $21.72 before selling off to a price of $7. If this trend repeats, CODX, which finds its support within the $15 price range, and could break the $30 mark.
The move in the Co-diagnostic stock, CODX, can be well explained if one looks further into their quarterly report on May 14th. Looking at their assets from Q4 2019 and Q1 2020, the company has seen a move from $2 million to $20 million in assets. These newly acquired assets, such as expanding their productivity for creating test kits, can be justified for the nearly 1600% move. Looking further into their financials, the company is operating at a net loss for the quarter at $1 million, although down from a $1.3 million loss in Q4.
Although these financials show a positive direction, the company is set to have an even better Q2, as the Q1 data were taken from the end date of March. With this timespan kept in mind, the company may be able to turn a profit in the upcoming quarters and expand their productions, as seen in their Salt Lake City facility, and Cosara joint venture facility in India.
A look into the future
Testing for the Coronavirus has been an essential part of finding a vaccination and “flattening the curve.” In the future, testing for the virus will become more popular as states within the U.S. progress to different phases of reopening. Within their conference call on May 14th, Dwight Egan, Chief Executive Officer, stated that “The Logix Smart™ COVID-19 test design and underlying technology has become an important part of the fight against the pandemic” and that “testing was the driver of company’s revenue in the first quarter.” This newly acquired revenue will not likely slow down, as Egan stated, “the need for testing on a mass scale continues to grow” and gave an example that “there are more than 76 million students that need to be in school this fall along with 157 million workers who need to be at work.” If even a percentage of these people need to be tested, the demand for test kits from Co-diagnostics will likely hit new highs, increasing revenue.
Looking forward, the future for Co-diagnostics remains bright and full of promising results. With an increasing demand for testing kits and a long timespan for a vaccination, Co-diagnostics should thrive in uncertainty.
All Data in this post taken from the Co-Diagnostics Q1, 2020, report.
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